The passage of Jumpstart Our Business Startups Act in February was praised by entrepreneurs and investors as a long overdue update to the startup financial regulation landscape. The JOBS Act eases access to investors for startups raising capital by removing the ban on general solicitation and allowing equity crowdfunding. However rules need to be set by the Securities and Exchange Commission before these provisions can be taken advantage of by startups.
Rory Eakin, cofounder of CircleUp, a startup that connects startups and investors, testified at a Joint Session of the Committees on Oversight and Government Reform and Financial Services September 13 to urge government to rapidly implement provisions of the bill. He spoke to Engine about his experience as an entrepreneur engaging directly with policymakers about the issues that affect his startup. Eakin’s testimony served as a reminder of the spirit of the bill as well as a timely nudge to keep the implementation process in motion, and demonstrates the value of startups participating in the policy making process.
Engine: How was the experience of testifying?
Rory Eakin: It was tremendously exciting, and pretty encouraging to see the level of engagement and attendance from the two subcommittees and on both sides of the aisle. There was a lot of enthusiasm for the JOBS Act. Many people have different perspectives on the ways it should be implemented, but there’s a lot of unity on the overall mission to support startups and to help them grow.
E: In your testimony you talk a lot how JOBS Act might help to open the investor market up. How do you think this would help your business and other startups?
RE: One of the most important messages we were bringing to light at the hearing is how concentrated the early stage investment market is. When you look at the data, a lot of venture capital and angel investment is concentrated in technology startups and in specific geographies. The real benefit of the JOBS Act for CircleUp is being able to spread investment to broader geographic areas and to areas not historically associated with early stage investment. CircleUp connects high growth startups to networks of accredited investors -- the JOBS Act represents a great opportunity to lift some of the burdens associated with investment in companies or geographic areas not previously well served by investor networks.
E: The rules just came out for the changes to general solicitation last month -- what impact do you think this provision will have for startups?
RE: We haven’t seen a direct benefit yet because we’re still waiting for implementation. Title II (the change in general solicitation) to us is the most important part of the bill, because it will enable companies to reach out to their consumers, and others very familiar with the brand already, to inform them that the company is raising capital and there are opportunities to invest. It’s a way of making a more efficient marketplace where buyers and sellers can come together. We want there to be an ecosystem that attracts high quality companies and high quality investors. We’re also anxiously awaiting the rules for Title III, crowdfunding, which will be very important for a number of other startup companies in gaining access to investor capital which will allow their businesses to grow and thrive.
E: What advice would you have for other entrepreneurs about engaging with policy that directly affects their business?
RE: There’s a lot of receptivity in Washington for hearing the perspective of startups. We found our way to the panel through our own blog. It was a relatively smooth path from engaging with the issues through writing about the subject to then providing testimony. Legislators have so much on their plate -- the role of the startup in this situation is to make it accessible for them to understand how policy and legislation affects startups both negatively and positively. We take our knowledge on these issues for granted, but translating them for the legislator audience is key -- which is an important part of what you do at Engine. Implementation of JOBS Act is an ongoing issue, and we hope more folks pay attention to and recognize they can be influential in DC - I’d love to connect with anyone who is looking to do that through twitter @circleup.